Covering Loss of Rent: What Are the Options?

Rental Guarantees as Security

Rental guarantees can be a useful form of protection, especially for tenants without a long rental history — such as students in shared apartments or young professionals just starting out (also in the case of rent increases). In this arrangement, parents or another third party guarantee to cover the rent if the tenant fails to pay. The typical guarantee amount is usually equivalent to two months’ rent. In addition to the rental guarantee, a security deposit is typically required, which can be held in a dedicated escrow account.

What to Consider Before Taking Out a Policy

Before purchasing rent loss insurance, it’s important to review the terms and costs carefully. Premiums are typically calculated as a percentage of the insured rental amount. The insurance provider will assess the landlord’s and the property’s risk profiles and usually conduct a credit check on the tenants before issuing the policy. Most insurers also include a waiting period before coverage takes effect.

What’s Not Covered by Rent Loss Insurance?

It’s important to note that not all rental damages are covered. Intentional damage or damage caused by improper property maintenance is typically excluded. Therefore, it’s advisable to review the specific terms and exclusions in your insurance contract.

Rent Loss Insurance for Existing Tenancy Agreements

In most cases, rent loss insurance can be taken out for both new and existing tenancy agreements. However, note that a waiting period may still apply before coverage begins.

Rent Payments Covered by the Welfare Office as a Form of Security

Another way to secure rent payments is through direct rent coverage by the welfare office, meaning the tenant does not pay the rent themselves. Instead, the responsible public authority covers the rent and transfers it directly to the landlord.

Which Social Benefits Can Cover Rent?

Tenants who receive social benefits such as citizen’s allowance (Hartz IV), social assistance, or benefits for asylum seekers and refugees may have their rent paid by the welfare office.
This model is particularly suitable for apartments in simpler locations or smaller units, where rent levels align with the office’s regional guidelines.
The amount covered depends on local regulations and varies by city or region.

Renting to Benefit Recipients – The Process

Before signing a rental agreement, landlords should obtain a written cost approval from the welfare office confirming that the rent will be covered.
The rent amount typically refers to the gross cold rent, which includes basic operating costs but excludes heating.
Landlords can choose to have rent payments made directly by the welfare office or transferred via the tenant—in the latter case, a power of attorney should be arranged to ensure reliability.

Risks and Considerations

While renting to benefit recipients can provide a steady income stream, there are some risks to keep in mind:

• Potential delays in payments due to administrative processes.

• Higher bureaucratic effort, such as documentation and communication with authorities.

• Possible legal or policy changes affecting rent coverage rules.

• Increased tenant turnover, depending on individual circumstances.

With proper documentation and clear agreements, however, renting through welfare-backed tenants can still be a stable and socially responsible rental strategy.